New book club meets tonight

Published: Wednesday, Feb. 27, 2013 11:28 a.m. CDT

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Story Time

Preschool Story Time begins at 10:30 a.m. Thursday. Enjoy a story time celebrating Dr.Seuss with Youth Services Librarian Phyllis Peter in the Carousel Horse Room. This program is designed for ages 3 to 5 with siblings welcome.

Toddlers and Twos story time is Tuesday. Choose to attend either at 10:30 a.m. or 11 a.m. (not both). This story time is for children age 18 to 36 months with a caregiver. Call (641) 792-4108 with questions.

Wonderful Winter Birds

The Wonderful Winter Birds program for children in kindergarten through sixth grade will be in the library meeting room at 2:30 p.m. today. Jasper County Conservation Board intern Greg Oldsen and volunteer Alexis Johnson will teach us how birds survive harsh Iowa winters. No registration is necessary.

New Book Club

A new book club has formed and will meet for the first time today at 6 p.m. in the library meeting room. If you would like information and cannot make the first meeting, call Nicole Lindstrom at (641) 792-4108 or email at nlindstrom@newton.lib.ia.us. More information to come.

Smart Investing, Week 4:

Mutual Funds Give Investors Many Advantages

Mutual funds offer many advantages for individual investors. “By pooling money from many investors, a mutual fund company provides diversification and the skills of professional managers to select and monitor the securities within the mutual fund,” said Margaret Van Ginkle, family finance program specialist with Iowa State University Extension and Outreach. Investments in mutual funds may be stocks, bonds or cash instruments.

According to Van Ginkle, other advantages of mutual funds include their liquidity, that is, they can easily be converted into cash. The ease of purchase and the smaller minimums needed to invest initially or in subsequent automatic monthly purchases also make mutual funds attractive.

However, the choices can be mind-boggling. “There are more mutual funds to choose from than there are stocks listed on the New York Stock Exchange. To narrow your search look at financial magazines and Web sites that evaluate funds. Then read the fund’s prospectus. This is a document a mutual fund company must provide you before you invest. The Securities and Exchange Commission requires specific information be included in the prospectus.”

Van Ginkle suggested you select a mutual fund whose investing objectives and risk level match your own. For example, an investor with the goal of providing retirement income that is many years in the future may select an aggressive growth or growth fund depending on the investor’s risk tolerance. An individual already retired may want a growth and income fund or a fixed-income fund.

“When you invest in a mutual fund you pay for someone else’s expertise and along with this comes annual management fees,” Van Ginkle added. In addition there may be other fees. “Avoid load funds that either charge an up-front sales fee or a redemption fee when you redeem your shares within a certain number of years. Also avoid funds that charge 12b-1 marketing fees.”

The return to you is significantly affected by these fees and expenses so shop for funds with a low expense ratio, Van Ginkle said. “This is the percentage of the fund’s net assets that go to annual operating expenses. To evaluate these various charges you can use a mutual fund calculator such as one provided by the Securities and Exchange Commission at www.sec.gov/investor/tools.shtml. Compare the costs of owning different funds before you buy.”

Van Ginkle says there are tax consequences of owning mutual funds you also should be aware of. A mutual fund company earns dividends and interest. A mutual fund also has capital gains when it sells securities. After deducting its expenses the remainder must be distributed to its investors. The distribution may be received in cash or reinvested to buy additional shares. The distributions must be reported by the investor as income annually unless the mutual fund is part of a tax-deferred account – e.g., 401(k) or an IRA. “Some of the income will be reported as dividends on your income tax return and taxed at your ordinary tax rate and some will be reported as capital gains and taxed at your capital gains rate.”

In addition to the tax on income made by the mutual fund while you own it, when you sell mutual fund shares you may have a capital gain or loss. “It is important to keep cost basis records of your mutual fund purchases (original cost and transaction costs plus reinvestment dividends and capital gains or losses) because you will need this to calculate your taxes,” Van Ginkle concluded.

This Iowa State University Extension series is a part of the Smart Investing @ Your Library project at the Newton Public Library. “The Smart Investing @ Your Library program is made possible through a grant received by Iowa Library Services provided by the FINRA Investor Education Foundation and the American Library Association,” said Sue Padilla, director at the Newton Public Library. You can find out more about investing at the ISU website www.extension.iastate.edu/families/family-finances-families or the Smart Investing project webpage at www.newton.lib.ia.us.